The olive oil effect

Spain is exporting its way out of economic intensive care

February 22, 2014
Obsession
Euro Crunch
February 22, 2014

Its banks are a mess and unemployment is rampant. So why are officials from Spain’s economic ministry all smiles?

Thanks to record-setting exports and a fall in imports, Spain chopped its trade deficit in half last year, according to data published by the ministry (link in Spanish). Overall, exports grew by 5.2% in 2013, one of  the better performances from a large European economy. (The UK managed only 1% export growth, Germany and Italy saw exports stagnate, and France saw sales slide by 1.6%.)

Spanish-foreign-trade-Exports-Imports_chartbuilder (1)

This is important, because as long as Spain’s local economy remains in the doldrums, one of its best hopes for boosting growth comes from selling goods, like its vast reserves of olive oil, to healthier economies abroad. For example, the surprisingly strong UK economy sucked in 14% more Spanish exports last year than the year before, which nearly doubled Spain’s trade surplus with Britain. Exports to fast-growing emerging markets in Africa, the Middle East, and Latin America also rose smartly.

Spanish-exports-in-2013-key-countries-and-regions-Value-bn-Growth_chartbuilder (4)

Spanish exporters also found success selling their wares to fellow members of the euro zone, which accounts for just under 50% of all Spanish goods bought abroad. This suggests that the falling inflation and lower labor costs that accompany austerity and recession are having at least some positive effects, making Spanish goods more competitive in countries that use the same currency. Indeed, Moody’s cited “structural improvements in the country’s external competitiveness” when upgrading Spain’s credit rating yesterday.

This is cold comfort for the huge number of unemployed people and those struggling to repay their loans following the country’s property market collapse. But officials reckon that export growth, at least, will continue at a similar rate this year, and that gives the long-suffering Spanish something to be hopeful about.

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